Intermediated Implementation. (arXiv:1810.11475v1 [econ.TH])

Mon, 29 Oct 2018 20:00:14 GMT

Many real-world problems such as sales and healthcare regulation involve a
principal, multiple intermediaries, and agents with hidden characteristics. In
these problems, intermediaries compete through offering menus of multifaceted
consumption bundles to agents, whereas the principal is limited to regulating
sub-aspects of the sold bundles by legal, informational and administrative
barriers. We study how the principal can implement through intermediaries any
social choice rule that is incentive compatible and individually rational for
agents. When intermediaries have private values, intermediated implementation
can be achieved by a per-unit fee schedule that allows intermediaries to break
even under the target social choice rule. When intermediaries have
interdependent values, per-unit fee schedules cannot generally be used to
achieve implementation, whereas regulating the distribution over sub-aspects
can under general conditions about the target allocation.